An investor perspective on branding

An investor perspective on branding

Day two of the Brand Owners’ Summit saw five notable industry experts and investors’ speak about the role of branding from an investor perspective, especially in terms of valuations

MADHUMITA PRABHAKAR

Nowadays, being a ‘billion dollar company’ in terms of valuations has become a fad and benchmark in the Indian entrepreneurship ecosystem. However, among the many questions that come to mind are, do valuations really matter? Specifically from a Brand Owners’ Summit perspective, our question was the impact on brand value on company valuation and an investor perspective on the concept of branding itself.

To address these queries, we had five notable industry experts – K.A. Srinivasan, CFO of Ventureast, Mithun Sacheti, CEO of Caratlane, C.Venkat Subramanyam, founder and director of Veda Corp and R. Narayanan, The Chennai Angels, debate about the correlation between brand value and valuations. Arun Natarajan, CEO of PE/VC data firm, Venture Intelligence, led the panel discussion.

Excerpts from the panel:

Take One: Valuations depends on the nature of business, market opportunity, and potential to scale

Within two years of founding, Carat Lane raised a Series A round to the tune of US $6 million from Tiger Global. Mithun Sacheti, co-founder, points out that two factors worked in their favour; one, that the e-commerce industry was still at a nascent stage and two, that there were not enough players operating in the online jewellery space at that point. “It was the thesis of the U.S. investors that certain businesses will take off in India and they wanted to invest in it,” he shares and adds that the investment came with a certain expectation too. “Since they were investing early in the business, they wanted a certain equity in return. It was a combination of what they wanted and what funding the business required to go to the next stage that led to this round,” he says.

Take Two: Brand building should have an impact on the numbers 

Venkat Subramanyam of Veda Corp shares an interesting perspective on this through a case study of Tirumala Milk Products fund raising strategy. When the company sought external funding, it already had revenues of Rs. 600 crore and was the third largest brand in South India.

During the fund-raising process, there were two diverse opinions from investors, about how the business should scale up. One set of investors believed that the company should get into packaged milk business, instead of liquid milk. And the other believed that liquid milk presents a great opportunity for the business to move away from government ties and become more organised. “Apart from certain attributes that brands carry, such as emotional connect, performance, quality and reliability, they have to deliver something tangible as far as financial parameters are concerned,” opines Subramanyam.

Take Three: The impact of the founder’s brand on a company 

R. Narayanan, entrepreneur, The Chennai Angels believes that the ultimate goal of branding is to maximise publicity for either the individual or the company, or both. “Having said this, during the early stage, if the space that the company is operating in is interesting, the company’s image takes precedence (Ola cabs is an interesting example here). If the space is crowded, then the founder’s image takes precedence (Ashok Soota’s Happiest Minds is an example),” he opines. This interplay continues until a stage when the individual doesn’t have to be the face of the company, they want to professionalise it, bring in outsiders and position the company alone.

Take Four: Return on investment    

K.A. Srinivasan opines that though several venture capitalists are not pro-cash burn model, they are of the belief that any spends in the market (on brand building/advertising) should have a clear return on investment. Of course, certain investments might have a longer time horizon, and investors will wait longer to see their returns; but the returns have to be there.

Of course, some of these rules don’t apply to extremely fast growth sectors like multi-product e-commerce, where the goal is get big really fast.

Advertising Branding Caratlane.com Marketing Startup Marketing The Chennai Angels Veda Corp Ventureast